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Mortgage Market Update

Monday’s bond market has opened in positive territory with stocks starting the final week of the year flat and no economic data to drive trading. The Dow and Nasdaq are both nearly unchanged from Friday’s close. The bond market is currently up 10/32 (2.21%), which should improve this morning’s mortgage rates by approximately .125 of a discount point from Friday’s morning pricing. There is nothing scheduled to be posted today that is relevant to mortgage rates. That doesn’t necessarily mean we will see bond prices and mortgage rates stay at current levels today though. We should watch the major stock indexes for indication of a potential intra-day change in rates. If stocks move into negative ground, bonds could improve, leading to a downward revision in rates later today. On the other hand, if stocks rally and move into positive territory, pressure in bonds and an upward revision in mortgage pricing is a good possibility. The Conference Board will post their Consumer Confidence Index (CCI) for December late tomorrow morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a large increase in confidence from November's reading of 88.7. Analysts are expecting tomorrow's release to show a reading of 93.5, meaning consumers felt much better about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing. Overall, I am expecting to see Friday be the most active day for mortgage rates due to the release of December’s ISM index, although Wednesday morning could also be fairly busy as the year comes to an end. Because of the holiday affected trading, we can see a larger move in the bonds with little data than is the norm.

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